What type of trader do you want to be?
Summary on how to become a trader
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There are a lot of misconceptions about online trading especially in depicting the real job of a pro trader. This time we will show what it takes to become a professional trader, what are the different paths you can experiment with.
What type of trader do you want to be?
First, let’s make it clear what the trader is. Trader as a category, is so broad, that it is almost meaningless. Basically, you can differentiate two types of trader: retail trader and institutional trader.
Before we jump in, let’s see some example of professional traders:
https://youtu.be/c-HtQe4lhUk
Retail trader
Describing the group of retail traders is like analyzing the animals of a zoo. But in the end, there are only two types of retail traders. The ones that get fed up with losing, and the ones that carry on and eventually become successful. The bright side of the story is that from being successful, you can build your own brand and influence others like Tim Sykes (later on him). Also, retail traders can earn money from social trading – our eToro review will introduce you to this topic – or from collecting subscribers to webinars and special mentoring.
Institutional trader
Institutional trader as a category refers to the employee executing trades at the big investment bank, brokerage firm, or other companies. You will get fix salary and hopefully a hefty bonus at the end of the year.
However, this job requires that you can work under huge pressure and take the risk. You will risk your firm’s money. But guess what happens if you don’t get the market pulse for a couple of weeks or simply just lay back for a while until the next trading opportunity arrives? You are fired.
This handy table highlights the pros and cons of the retail and institutional traders.
Retail and institutional trader
| Interactive Brokers | Interactive Brokers is a US discount broker. It is listed on a stock exchange and regulated by several authorities, including top-tier ones like the FCA and the SEC. | Visit broker |
| Alpaca Trading | Alpaca Securities LLC is US-based broker providing commission-free API stock trading. The company is regulated by the top-tier SEC and FINRA: | Visit broker |
| TradeStation Global | TradeStation Global is an introducing broker of Interactive Brokers. This practically means that assets and cash are held with Interactive Brokers, but services like fees and customer support are provided by TradeStation Global. TradeStation Global is regulated by the top-tier UK FCA. | Visit broker |
| Zacks Trade | Zacks Trade is a US discount broker that also allows international clients to open an account. Zacks Trade is a division of LBMZ Securities, which is regulated by SEC and FINRA. Customers are protected by the SIPC scheme, up to $500,000 (including a $250,000 limit for cash). | Visit broker |
| Saxo Bank | Saxo Bank is a Danish investment bank. It is regulated by several financial authorities globally, including the top-tier UK FCA. | Visit broker |
Seeing these major differences between institutional and retail trading you might ask rightfully? OK, which one should I be? Looking a bit deeper may help you, so let’s go ahead.
During my own trading career, I started as a retail trader and failed a couple of times. I didn’t give up and finally, I ended up on the institutional side being able to invest other people’s money under regulated circumstances. As you can see the two categories are not excluding each other, so don’t think in an either-or way.
How to start trading?
Regardless of you want to become a retail or institutional trader, there is a path you have to go through. The first and one of the most important step is learning the basics. After you gained some knowledge, you have to test yourself in real. The last and probably not the easiest step is to trade with reasonable money.
Learn the basics
Here is some everyday trader lingo, let’s test how much you get it.
The risks surrounding the euro area growth outlook are considered to be broadly balanced. On the one hand, the current positive cyclical momentum increases the chances of a stronger than expected economic upswing. On the other hand, downside risks relating to predominantly global factors continue to exist. – Mario Draghi, ECB Press Conference
The euro is softening, and the RSI and MACDs warned of more downside risk ahead of next week’s FOMC meeting. The euro has slipped below its 20-day moving average (~$1.1190) for the first time since April 18. It has retraced more than 61.8% of the last leg up that began at the end of May from $1.1110. That retracement objective was $1.1180. A break of the $1.1100 area could quickly see $1.1050.- Seekingalpha.com
Both texts sounded Chinese? Time to learn the basics!
Every trader can reach temporary success but being profitable in the long run requires a lot of knowledge and experience. The good news is that you can quickly collect the basics from free educational sites and the brokers’ educational sites.
My top picks for free educational sites:
- Babypips
- Fxstreet
- Coursera
My top picks for broker’s educational sites:
- Interactive Brokers
- Saxo Bank
- TradeStation
- tastyworks
- FXCM
Test yourself for real with demo and real account
Paper trading aka demo practice is a must, should be an intense period of learning. Generally, I recommend two things to do.
- Be foolish: trade like a real gambler, forget about money management rules, stop-loss orders, position sizing, etc. You will see how easy and quick you can lose money.
- Be serious: practice with the amount that you will deposit to your real account. Forget the $100.000 sum if you will only deposit $1000 to your live account.
Besides the demo account, trading on a real account is also very important. You will behave differently when you trade with your real money and in real nature. During your trades, there are some points you should take into account: stay informed, create your strategy, and analyze your performance.
An actionable checklist on how to become a trader
How Long Does It Take to Become a Professional Trader?
A common question among aspiring traders is how long it actually takes to reach a professional level. One useful perspective comes from professional trader Birger Schafermeier, who often refers to Malcolm Gladwell and his well-known 10,000-hour rule for mastering complex skills.
If someone dedicates themselves fully to trading and spends roughly 40 hours per week studying and practicing, those hours would accumulate in about 250 weeks. In other words, reaching a professional level could theoretically take close to five years. The broader lesson is that developing real trading expertise requires persistence and long-term commitment. Even after years of market experience, traders can still refine their methods and continue improving.
Trade With Meaningful Capital
Another essential factor in becoming a professional trader is having sufficient capital. There is an old joke in finance about how to make a million in trading: start with a billion. While exaggerated, it highlights an important reality—very small trading accounts rarely allow meaningful progress.
Many retail traders attempt to compensate for limited funds by relying heavily on leverage, exposing themselves to extremely high risk. The result often ends with a margin call from the broker or discouragement after repeated losses, which can halt progress entirely.
Using Other People’s Capital
So what options exist for talented traders who cannot afford to risk $50,000–$100,000 of their own capital?
One practical route is trading with external capital through proprietary trading firms. These firms allocate their own funds to skilled traders who operate as employees and attempt to generate profits using short-term strategies such as day trading.
Some well-known proprietary trading firms include:
-
Flow Traders
-
Gelber Group
-
Geneva Trading
-
Optiver
-
Positive Equity
While finding open positions at these firms is usually possible, getting hired is highly competitive. Candidates typically need strong numerical ability, analytical thinking, and problem-solving skills. Having an academic background in mathematics, engineering, or finance can also significantly improve one’s chances of being selected.
Choose the right broker
Which Broker Can Help You Gain Real Trading Experience?
As mentioned earlier, gaining experience in real market conditions is one of the key steps toward becoming a professional trader. The next logical question is: which broker should you use to get that experience?
After reviewing multiple brokerage platforms, three stand out as particularly suitable options. If you are currently looking for your first broker—or considering switching to a more reliable one—it may be worth exploring some of the top platforms available for beginner traders.
Below you can find a shortlist of brokers that provide a solid environment for learning the markets, testing strategies, and gradually building real trading experience.
| Saxo Bank | Fusion Markets | CMC Markets | Interactive Brokers | Capital.com | |
|---|---|---|---|---|---|
| EURUSD spread | 0.8 | 0.0 | 0.7 | 0.1 | 0.6 |
| GBPUSD spread | 1.3 | 0.2 | 0.9 | 0.3 | 1.3 |
| AUDUSD spread | 0.8 | 0.0 | 0.7 | 0.1 | 0.6 |
| EURCHF spread | 1.4 | 0.6 | 2.5 | 0.4 | 2.2 |
| EURGBP spread | 1.4 | 0.3 | 1.1 | 0.2 | 1.5 |
If you want to dig deeper into the topic, read our best brokers for beginners article.
Summary on how to become a trader
Learn the theory
Trading stocks, futures, options and other derivatives are not for dummies. You need to understand the fundamentals and technicals in order to start building a trading strategy.
Get a lot of experience
Focus not only on quantity but quality. There is no point in burning one micro account after the other. This is the stage where most of the retail traders give up, as they don’t apply basic risk management rules. Also, trade with an online broker that will assist you with quality research and further advanced education. Feel free to use our broker comparison table.
Trade a reasonable amount
Get serious with trading on a well-financed account. If you are a whiz kid, you can turn your $5,000 into millions in a couple of years. If you’re not a genius you can still be successful at prop trading firms or if you have some great PR and self-marketing skills you can build your own brand and earn extra income from educating others using your proven track record.
Read on to take the next step in your trading career
- Study our detailed broker comparison table
- Check the best brokers for day trading
- Check the best brokers for options
- Check the best brokers for futures
- Check the best forex brokers
- Check the best CFD brokers
| Saxo Bank | Fusion Markets | CMC Markets | Interactive Brokers | Capital.com | |
|---|---|---|---|---|---|
| EURUSD spread | 0.8 | 0.0 | 0.7 | 0.1 | 0.6 |
| GBPUSD spread | 1.3 | 0.2 | 0.9 | 0.3 | 1.3 |
| AUDUSD spread | 0.8 | 0.0 | 0.7 | 0.1 | 0.6 |
| EURCHF spread | 1.4 | 0.6 | 2.5 | 0.4 | 2.2 |
| EURGBP spread | 1.4 | 0.3 | 1.1 | 0.2 | 1.5 |